The Woolworths Limited (ASX: WOW) share price has been hit hard, falling more than 30% since 2014.
Is Woolworths Limited a buy at this share price?
Shares of Australia's largest supermarket operator went into a tailspin when the market grew concerned over sluggish sales growth within its supermarkets business and a flailing Masters home improvement business was put under the microscope.
Fast forward a couple of years and Woolworths continues to face stiff competition in its supermarkets business from rivals such as Coles, owned by Wesfarmers Ltd (ASX: WES), and Aldi.
The retail heavyweight has also liquidated its Masters business and sold its Home Timber and Hardware brand. Moreover, its Big W franchise continues to struggle with competitive pressure from the likes of Kmart and Target.
So despite falling 30%, clearly, an investment in Woolworths shares is not without its risks. Moreover, even if a turnaround in the company's fortunes did show through investors must have thick skin and be patient.
Valuation
At today's share price of just under $23, Woolworths shares change hands for 18 times next year's expected profits. That is marginally above the market's average valuation, but it also appears high considering the company is in the midst of a turnaround.
According to analysts surveyed by The Wall Street Journal, fair value for Woolworths shares is $23.78 — 4.1% above today's market price. For a company that is facing competitive threats across all of its businesses, that is not a very large discount. Unsurprisingly, of the 13 analysts surveyed six have a 'sell' rating on Woolworths shares.
Buy, Hold or Sell?
The Woolworths share price is trading around fair value, according to most analysts. That is despite it being forecast to pay a dividend equivalent to a yield of 3.6% fully franked in the coming year.
In my opinion, the worst appears to be behind Woolworths, with its management now able to focus on its core supermarket and liquor assets.
